It follows days of talks over austerity cuts that were demanded by eurozone financial leaders.

With a Greek election expected in April, the leaders of the three coalition parties were reluctant to agree to even more cuts to wages, jobs and pensions.

But with a deadline for repayment of bonds looming and intense pressure from the lenders, a deal has finally been hammered out.

Previous cuts have sparked riots and strikes, and with unemployment already at 20 per cent, the additional austerity measures are expected to cause more social unrest.

The ECB, the IMF and the EU will now decide if the measures are enough to allow the bailout to continue, while Greek trade unions have promised a 48-hour strike to protest against the proposals.

Athens' partners in the European Union and the International Monetary Fund (IMF) have been exasperated by a lack of agreement on the sacrifices they demanded in return for the bailout, with time running out for Greece before a major March 20 bond redemption.

Greek finance minister Evangelos Venizelos set off for Brussels without a complete deal after all-night talks with leaders of the three Greek coalition parties and chief EU and IMF inspectors left one sensitive issue - pension cuts - unresolved.

But following further negotiation, Mr Papademos confirmed an overall agreement had been reached.

"The consultations between the government and the troika on the issue which remained open for further discussion were successfully completed this morning," his office said in a statement.

The euro and European stocks strengthened on news of the breakthrough, which raised prospects of averting a chaotic hard default by the eurozone's most indebted country within weeks.

The risk premium investors charge for holding Italian and Spanish bonds rather than safe-haven German Bunds fell back.

Eurozone officials say the full package must be agreed with Greece and approved by the EU, IMF and European Central Bank by February 15 so legal paperwork can be completed in time to avoid a chaotic default that may threaten the global economic recovery.

"The financial survival of the country in the coming years depends on the new program ... it is a time of responsibility for everyone," Mr Venizelos said.

Greece's two major labour unions called a 48-hour strike for Friday and Saturday against the reforms that the party chiefs managed to agree on.

"The painful measures that create misery for the youth, the unemployed and pensioners do not leave us much room," said secretary-general of the ADEDY union, Ilias Iliopoulos.

"We won't accept them. There will be a social uprising."

Mr Venizelos should now be able to present to fellow eurozone finance ministers a fully-fledged new bailout plan, including a commitment for 3.3 billion euros in budget cuts this year, when they meet.